A little update on the mortgage market

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Its been an interesting couple of months in our industry. Although interesting does not really translate to good.

The good

So for us at least, the overwhelming positive is that the housing market has been buoyant. There has been plenty of demand and the bottleneck appears to be a lack of homes going on the market.

The other positive is that criteria seems to be holding in a strong position. This is despite all of the negatives I will go onto shortly.

And I think that is about it really. Not a lot of positives but really there are only 3 things that are important in our industry – rates, criteria and demand. The latter 2 are holding up quite well so far.

The not so good

OK, so this is where it starts to go downhill a little.

Lets start with the big one – Interest rates! These appear to be going in one direction and that is not great for people looking to take out a new mortgage. For a variety of reasons (but primarily the bank of england base rate) interest rates are increasing. We were being told as early as March that the base rate would be around 1.5% by August and close to 2% by the end of the year. That is looking very accurate.

The cost of living

This is starting to be felt by everyone now. From utility bills to shopping to more or less everything. People are noticing there is less money left over at the end of the month. This does appear to be having a slight effect on the number of enquiries we are receiving or at the very least playing a part. Whilst it could easily be put down to other things, I think it would be naive to pretend it is not having an effect.

Mortgage amounts are starting to drop. Generally speaking the size of mortgage you can obtain is based on affordability and either the rate payable or a stress tested rate on the mortgage. With interest rates rising and the cost of living increasing this is affecting how much can be obtained. We did a quote for someone in March and then another quote earlier this month, there was around £10-15k difference in what they could obtain.

The lack of properties on the market

The next issue which seems to have been the case a good year or so now is the lack of properties going onto the market. People seem to be unprepared to put their property on the market until they have found a new property. This is creating a sort of catch 22 scenario which is contributing towards the bottleneck.

And lastly, lenders service levels. This appears to have only happened in the last month or so. There are quite a few lenders taking over 10 working days to assess applications. We are used to seeing 1-4 working days with the majority of lenders for as long as I can remember so to see that double or treble in the space of a month is unexpected and frustrating.

Summary

There are quite a few negatives at the moment in our industry. But 2 of the 3 big ones are still looking pretty good. I seem to be one of the pessimistic few who thinks things will slow down quite a lot in the coming months. Primarily due to the cost of living but I seem to be in the minority in that regard. Hopefully I am wrong, but time will tell.